Operational Risk Capital
71 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020
There are 2 versions of this paper
Operational Risk Capital
Date Written: July 2020
Abstract
We study the response of banks to the introduction of a new capital requirement relating to operational risk. To isolate the effect of this new regulation on realized operational risk losses, we take advantage of the partial US implementation relative to full European adoption. Operational risk losses are reduced in treated banks. The extent of loss reduction depends upon the measurement approach used to calibrate operational risk capital requirements. Banks with low institutional ownership and those without binding regulatory capital constraints also present significant loss reduction. We link these findings to incentives for improved risk management and governance post treatment.
Keywords: Bank Regulation, Basel II, Measurement Approach, Monitoring, Operational Risk
JEL Classification: G21, G32
Suggested Citation: Suggested Citation
Thomas Conlon (Contact Author)
University College Dublin ( email )
Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland
HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
Do you have a job opening that you would like to promote on SSRN?
Operational Risk Capital
This is a CEPR Discussion Paper. CEPR charges a fee of $8.00 for this paper.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
